Blockchain, the end of intermediaries?

Blockchain is shaking up the web. Created alongside Bitcoin, this new technology promises to do away with intermediaries for transactions as well as authentication of documents and files – the ultimate objective being intrinsically secure, faster and cheaper transactions. Fantasy or reality? We look at one of the digital phenomena of the decade…

Blockchain is a new concept to take on board. One involving an enormous database, an immense ledger and a chain of information blocks distributed across the network. Above all, it is a technology for storing and transmitting information transparently, securely and without any centralized control. By extension, a blockchain constitutes a database containing the history of all transactions carried out between its users since its creation. This database is secure and distributed, shared by a number of users without any intermediary, enabling each participant to verify the validity of the chain and preventing any falsification or destruction.

A blockchain may be public, open to everyone, or private, with access restricted to a certain number of participants.

How does it work?

Any public blockchain functions with a currency or programmable token, such as Bitcoin. Transactions carried out between users on the network are grouped into blocks, each block being validated by network “nodes”, called “miners”. Once the block has been validated, it is timestamped and added to the blockchain. The transaction is then visible to the receiver and the whole network.

While cryptographic tools are traditionally used to authenticate transactions, the essence of this technology lies in a consensus algorithm. This is what allows the miners to agree on the transaction history, without having any central point of reference. For example, the consensus algorithm used by Bitcoin’s blockchain is based on a “proof of work”, meaning the resolution of an algorithmic problem.

What is it for?

It would be overly simplistic to see blockchain as merely a payment system since, according to its developers, its applications are limitless and in itself it constitutes a revolution as major as that of the web in the 1990s. Finance, insurance, real estate, health, transport, online voting, administration and citizenship, banking, conveyancing, land registry – these are just some of the sectors which could use this technology to enhance reliability and “disintermediate” relations between economic players and citizens.

” Blockchain is a technology allowing individuals who do not necessarily trust each other to cooperate without trusted third parties. If a majority of the network behaves as expected, then so does the system and nobody can corrupt it. Since transactions are the basic function of the blockchain, cryptocurrencies are the most obvious application ” explains Emmanuelle Dottax, OT Security Architect.

Payments

As a storage and security technology, blockchain is already helping digital currencies such as Bitcoin to develop, although many questions remain. To be used by the general public, it would need to be able to manage as many transactions as traditional networks such as Visa or Mastercard. And finally, whereas it currently takes an hour for a Bitcoin transaction to be validated, a solution would need to be found allowing instant validation of payments.

As Emmanuelle Dottax confirms, this technology is attracting attention among players in the existing banking sector. “As well as transactions between individuals and retailers, banks are very interested in using blockchain among themselves, for example to optimize interbank settlement systems. This would be what we call a “permissioned blockchain”, unlike Bitcoin which is open. Banks hope to achieve massive savings in this way”.

Like all promises, blockchain has its challenges and limitations, in terms of economics, governance and ethics. There is also currently an almost total legal vacuum surrounding this new technology.